It was inevitable. As the coronavirus spread across the world, millions of Canadians sought out the Canada Emergency Response Benefit (CERB). Perhaps you’re one of them. But if not, the CERB offers those eligible $500 per week for a total of 16 weeks. That’s $8,000 of much-needed income in a dire situation.
But, recently, there’s been a word of warning with the CERB. If you’re not eligible, the Canada Revenue Agency (CRA) will be asking you to return those payments in the next year or so. If you made more than expected, left your job voluntarily, or your boss hired you back, that would make you no longer eligible.
The last point is more and more likely. The Canadian Emergency Wage Subsidy (CEWS) is being touted as the reason 289,600 jobs were created in Canada last month. That’s hundreds of thousands of employed people bringing in cash again — cash that can be invested rather than collecting CERB payments.
It also means there is less and less time to buy those passive-income producers while stocks remain low — especially those dividend stocks that offer monthly payments. Even if you’re now creating savings from scratch, here is how you can bring in extra cash through investing today.
Step one: 10%
If you’re now receiving a pay cheque, do the smart thing. Take 10% of that pay cheque and put it towards savings and investments. That might be as little as $100, but something is way better than nothing. Making automatic contributions to your investments leaves out the chance of both forgetting and spending that 10%.
$100 might not sound like a lot, but in a year, that’s $1,200. In five years, it’s $6,000. In 25 years, it’s a whopping $30,000. Then there are the dividends to consider. Reinvesting dividends means you’re putting extra cash aside without taking any extra from your pockets.
Step two: The stocks
Now you’ll need a solid passive-income portfolio from today’s run-down marketplace. There are a lot of options, but I would go with WPT Industrial REIT (TSX:WIR.U), Pembina Pipeline (TSX:PPL)(NYSE:PBA), and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM).
Each stock comes with its own benefits right now. WPT Industrial offers a unique way to get into the e-commerce boom. The company owns light industrial properties so that e-commerce businesses can store and ship their products from these buildings. WPT industrial is currently in the process of expanding its business and is doing better than ever, offering investors a 6.07% dividend yield.
Pembina Pipeline, meanwhile, has been beaten down, because it’s in the energy sector. The company has secured growth projects worth by $5.6 billion in the works to create pipelines over the next few years. Once built, the company’s stock price should soar, as its earnings increase. It offers a yield of 7.62% as of writing.
Then there’s a solid Canadian bank like CIBC, offering steady, stable payouts, as the company rebounds from this financial crisis. The bank has been beaten down more than the other Big Six banks due to its exposure to the housing market. However, if you’re planning to hold onto a stock like this for decades, banks are practically a sure thing to improve and improve quickly. CIBC offers investors a dividend yield of 6.31% right now.
Now, if you look at these stocks today and buy at bargain prices, you stand a chance to make $2,000 in a short time frame. First, consider reinvesting your dividends to buy even more stock. Then you can probably estimate that you will see a conservative 10% increase in the stocks for the next several years.
By holding onto these stocks for 25 years, you could have a portfolio of almost $125,000 from your investments alone. That’s an incredible $95,000 more than what you would have had by just putting your cash aside. Meanwhile, your investments will continue to bring in cash through dividends for as long as you’re holding them.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Amy Legate-Wolfe owns shares of PEMBINA PIPELINE CORPORATION. The Motley Fool recommends PEMBINA PIPELINE CORPORATION.